Hello! I am fairly new to the blog. I have some lingering debt that is on my credit report that I do want to pay off. Some of the creditors have offered a settlement amount which is far less than what was originally owed. Does anyone know if I should pay the settlement amount or should I pay in full. I understand that the creditors want their money. (I am talking about collection agencies) Will paying these off affect my credit score? I am open for suggestions. I am not sure if I should pay these off in one lump sum or set some goals and pay them down until they are settled and I would like to know how this affects my credit.

My mother paid a settlement amount not the full amount odd and the difference between the two was considered income by the IRS so she ended owing money to the IRS. Just something to think about.

Still, paying off the debts is fine. It can raise your credit score, from my understanding.

Get the total amount to be paid IN WRITING and make sure it clearly states that paying $$_____ amount will SETTLE THE DEBT IN FULL. This is important.

Pay by traceable means (cashier’s check, money order).

Make copies of the letter and the check before you mail.

Send with SIGNATURE REQUIRED (the bright pink labels at the Post Office). If nobody signs for the payment, the postman will not just leave it there.

KEEP YOUR DOCUMENTATION.

Once you have paid, tracked that the payment has been received. You can check with your bank to see exactly when the cashier’s check has been paid; plus, you will have the signature card back showing that date that someone at the company signed for the payment to be received. Send a copy of the letter and the check payment to each of the credit bureaus and ask them to update the status as PAID.

So your recommendation is to pay in full, not the settlement amount. I know colletion agencies purchase debt for pennis on the dollar so I am afraid if I pay a settlement amount that the debt will come back to bite me again. If I write a personal check to do so I should be able to pull a copy from my statement as well. (as long as they accept personal checks).

Do not write a personal check, that gives them your account number and next thing you know they have emptied your account. The danger of using a personal check with some sleazy collection agency is that you just gave them access to your account and they could take money directly out of your account. Before everyone bombards me with ‘that’s illegal!’, it has not stopped them before. It always advisable to pay these sleazy people with money orders, etc.

I had a debt collector call me about 2 months ago, and when I refused to send them postdated checks or give them my debit number, he told me that there was nothing we could do to work together and hung up on me! I did not dispute the debt and was willing to pay it, but not on their terms!

Once the debt is sold off to the collection agency, you can negotiate with them for a lower amount that even what they state.

If the original debt is $5,000 and the collection agency bought it for $3,000 and they are asking you for that $3,000; call up and offer them $1,000. They may counter, maybe not. However, since they are just out to get what they can, offer them the $1,000; get it in writing, stating that paying the $1,000 will be PAYMENT IN FULL and then pay that amount.

You don’t have to put up with abuse from these creeps. If the debt is legit, ask for documentation. Do not give any of them post dated checks, debit card numbers or any access to your bank account. Some of them will drain the account and you will have to fight them – not a path you want to go down.